Click here for Full Issue of EIR Volume 26, Number 10, March 5, 1999
EIRFeature
Recovery program
could have blocked
Hitler’s ‘legal coup’
by Michael Liebig
The following is the edited text of a speech given at the semi-annual conference of
the Schiller Institute and International Caucus of Labor Committees, in Reston,
Virginia on Feb. 14, under the title “Von Schleicher, the Schröder-Schacht Plot,
and Hitler’s ‘Legal Coup.’ ” The conference was entitled, “The Road to Recovery:
Defeat the New Confederacy and Al Gore,” and Liebig’s speech was part of a
panel entitled, “Economics: The Science of Achieving the General Welfare.”
In my remarks here, I want to sketch the economic and political situation in Germany in the 1931-33 period, the worst years of the First World Financial Crisis and
Depression. My special focus will be the weeks, beginning Nov. 6, 1932, when the
Nazi Party suffered a massive defeat in the Reichstag elections, losing 2 million
votes, until Jan. 30, 1933, when Adolf Hitler took power through a “legal coup.”
Within this time frame, from Dec. 2, 1932 to Jan. 28, 1933, Gen. Kurt von
Schleicher was German Chancellor. This man came, literally, within inches of
defeating Hitler. On Dec. 21, 1932, the U.S. Ambassador in Berlin, Frederic
Sackett, met with Gen. Kurt von Hammerstein-Equord, the chief of the Reichswehr
army command. They agreed that the decline of the Nazi Party was “now well
under way.” So sure was Ambassador Sackett that the political tensions in Germany
had finally “relaxed,” and Chancellor von Schleicher was in control of the political
situation, that he left Berlin to go to Switzerland.1
Here in the United States, on Nov. 8, 1932, Franklin Delano Roosevelt was
elected President. On Feb. 15, 1933, an assassination attempt was made on President-elect Roosevelt, who survived uninjured, while Chicago Mayor Anton Cerman, standing near Roosevelt, was shot, and died of his bullet wounds. On March
4, 1933, Roosevelt was inaugurated President.
1. Bernard V. Burke, Ambassador Frederic Sackett and the Collapse of the Weimar Republic (Cambridge, Mass., 1994).
22
Feature
EIR
March 5, 1999
© 1999 EIR News Service Inc. All Rights Reserved. Reproduction in whole or in part without permission strictly prohibited.
Gen. Kurt von
Schleicher (left), who
became Chancellor of
Germany on Dec. 2,
1932, came within
inches of preventing
Hitler’s rise to power.
Among those in his
faction, promoting a
public works program
for economic recovery,
were (lower right) Erwin
Planck, who later lost
his life in the
unsuccessful 1944 plot
to kill Hitler; and (upper
right) Günther Gerecke,
Schleicher’s Reich
Commissioner for Public
Works.
In Germany, on Feb. 27, 1933, the Nazis staged the
Reichstag fire, the pretext for implementing a full-scale dictatorship. On March 17, 1933, Hjalmar Horace Greeley Schacht
received, from Hitler’s hands, the document naming him president of the Reichsbank.
Then as now: the subjective factor
We should, obviously, look back at the 1931-33 period
from the standpoint of current history: the Second World Financial Crisis and Depression. I will not try to make an extensive listing of specific historical parallels between then and
now. Instead, I will try to give a comprehensive, albeit sketchy
gestalt of this historical period. I believe that, by taking this
approach, we will be able to learn the most from history. I
want to demonstrate here, that history is not predetermined;
history takes no inevitable course, in the sense of “historical
materialist” or “cyclical” interpretations of history. In reality,
the subjective factor is what is crucial in history; the subjective factor determines the course of history. History is made
by human beings.
The events which took place during 1931-33 in Germany,
demonstrate this absolutely clearly. It was not inevitable that
Hitler would take power. To the contrary, never in his political
career was Hitler closer to defeat than in the period between
November 1932 and January 1933. Goebbels’s diaries from
December 1932 are filled with depression and despair, and
Hitler thought about committing suicide. The national elections on Nov. 6, 1932 brought a 4.2% loss in votes for the
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March 5, 1999
Nazi Party, down from the 37.2% they had received in the
July 1932 elections, the highest vote the Nazis ever got in free
elections. In December 1932, the Nazi Party finances were
ruined, and Gregor Strasser had started an inner-party revolt
against Hitler.
So, why was Hitler not routed then? Who came to his
rescue? What was lacking among his republican enemies,
who had come so close to defeating him? I will try to answer
these questions. And here lies the lesson of history for today.
The Social Democrats and the Communists
First, we have to clear away some illusions. It must be
said that the Social Democratic Party (SPD) and the German
Communist Party (KPD) did not push Hitler to the wall. On
the surface, the Communists, who got a 16.8% vote in November 1932, were the most bitter enemies of the Nazis. Continuous, ferocious street fighting and beer hall battles between
Nazis and Communists led to hundreds of deaths on both
sides. The Nazi Party’s prime propaganda focus was “crushing Bolshevism” in Germany, and this propaganda focus was
much more intense than their anti-Semitic tirades during
this period.
However, beginning Nov. 2, 1932, the Nazis and the Communists jointly organized the Berlin transport workers’ strike,
which lasted one week. The KPD in October 1932 issued an
election program, which defined the Nazis merely as the right
wing of a vast fascistic complex, which included really all
parties, business groups, trade unions, the Reichswehr, and
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23
government structures—everybody except the Communists
themselves. In this fascistic bloc, according to the Communists, the Social Democrats and trade unions merely represented its “social-fascist” left wing. The Communists viciously fought any attempt to take effective measures against
the Depression and mass unemployment, declaring that the
working class must never play “doctor at capitalism’s sickor death-bed.” The Communist leadership pursued a strategy
which held that it would not be a disaster, if Hitler were to
take power, because this would drive class conflict to its climax. Hitler would soon “expose himself” to the masses, and
would be discredited. Thus, the way would be opened up
for a socialist revolution, under the KPD’s leadership, which
would finally liquidate the capitalist-imperialist system and
create a “Soviet Germany.”2
In November 1932, the votes for the SPD had shrunk to
20.4%, compared to the Nazis’ 33% and the KPD’s 16.8%. At
that time, the Social Democrats were politically marginalized,
which was the result of the paralysis into which the SPD
leadership had driven their own party. The army of unemployed in Germany in 1932 had swelled to 6 million, but the
SPD’s top men—parliamentary faction leader Rudolf Breitscheid, party boss Otto Wels, and the party’s economic experts Rudolf Hilferding, Fritz Naphtali, and Otto Bauer—had
obstructed any government-led public works policy for the
SPD. Failing to effectively address the all-dominating issue
of overcoming mass unemployment meant political suicide
for the SPD. The SPD leadership, especially Hilferding,
claimed that a sizable state-directed job creation program
would inevitably be “inflationary.” Thus, the SPD effectively
backed Heinrich Brüning’s austerity policy, albeit in a more
“moderate” form, calling for “social justice” in its implementation. The climax of absurdity was that the same SPD leadership, nominally still Marxist, would argue that anyone who,
through a state-led job creation program, wanted to assist the
capitalist system when it was in deep trouble, was a no-good
Marxist. Opposite to the SPD party leadership, in the German
trade union movement, especially in the SPD-leaning ADGB
trade union federation, there were different voices, who advocated a state-led, large-scale work creation program.3 We will
come to that in a moment.
Von Schleicher’s address to the nation
We now have to turn to the man who represented the
biggest threat to Hitler and the financial oligarchy, both German and Anglo-American, Gen. Kurt von Schleicher. Following the November 1932 elections, with the defeat of the Nazis,
Schleicher became Chancellor on Dec. 2, 1932.
On Dec. 15, 1932, Schleicher made a radio address to the
2. Wolfgang Michalka and Gottfried Niedhart, Deutsche Geschichte 19181933, Dokumente zur Innen- und Aussenpolitik (Frankfurt, 1992).
3. Gabriele Liebig, “How the German Trade Unions Could Have Stopped
Hitler,” EIR, April 11, 1997.
24
Feature
nation, in which he said: “I have felt a very grave reluctance
to accept the office of Chancellor. . . . Especially because
having the Defense Minister become the Chancellor smells
of military dictatorship, and because there is a danger that the
combination of these two posts will drag the army too much
into politics. But the consideration that doing this, will illuminate strongly the gravity of the situation in which we are, and
will tend to cool down certain troublemakers, and will thus
make the deployment of the army unnecessary, has convinced
me to set aside my concerns over accepting the post.
“Therefore, I want to ask my fellow citizens, to see in me
not just the soldier, but also the administrator of the interests
of all layers of the population, for, it is hoped, only a brief
period of emergency. I have not come to bring the sword, but
to bring peace.
“I think I can say that, as my thoughts about military
dictatorship have not just now been formed, and are well
known. As I have said before, you do not sit comfortably on
the sharp edges of bayonets. In the long run, you cannot rule
without having the broad mood of the people behind you.
Such a mood in the broad population, my government has yet
to earn by its deeds. I have no illusions about the severity of
this task. For the moment, I will be satisfied, if the Reichstag,
which understandably has currently a hefty dose of suspicion
about the government, will allow it, without obstruction and
well-known parliamentary maneuvers, to realize its program.
This program consists of just one point: Create work! All
measures which the Reich government will implement in the
coming months will more or less serve this one goal. Travelling across Germany during the past weeks, I was myself
convinced, that Germans of all social layers are dominated by
one thought: Give us work, and thus, the hope for an economic
recovery! Really, nothing else interests us, least of all, constitutional changes and other niceties, which do not fill your
stomach. In our people lives a will to create, to produce, that
cannot be suffocated by any setback. In all layers of society,
there is the same courage and determination, which we have
seen during the war, for combatting the profound economic
suffering of our time. This deserves the highest admiration,
and therefore it must be the supreme law of the state leadership
to support this determination and this fight, irrespective of all
economic or other considerations. A mood of desperation and
catastrophe must be preempted. This can only be achieved, if
psychological as well as economic considerations are applied
to our job creation policy (Arbeitsbeschaffung). That stated,
it is true that in the long run, unemployment can only be
overcome through the gearing up of the whole economy.
“However, one cannot comfort people who are close to
despair, by elaborations that, according to the laws of economic ‘rationality,’ each economic low will eventually be
followed by a high. They want to see immediate and tangible
help. Therefore, we have to build the dams in time, so that
the floods do not overwhelm us before a cyclical economic
recovery can make itself felt. That is what we must do, even
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March 5, 1999
if the dams do not correspond 100% to the strict laws of
economic ‘rationality.’ I have proposed to the Reich President, that a Reich Commissioner for Public Works be named.
His task will be to search for any opportunity for work, and
to design and implement a generous public works program.
The commissioner must take the role of the shepherd dog
against all bureaucratic or other impediments.
“No doubt, such a job creation policy incurs greater risks
than a normal expansion of employment would. Thus, expenditures for luxurious purposes are categorically ruled out in
our job creation program. The program must be based on
existing means of production, lying idle, for purposes of maintenance and improvement. Giving contracts to private firms,
is preferable to doing it under public direction. What is decisive, is that we have found a solution for financing the program, which categorically rules out any inflation. This is assured, through the collaboration of Reichsbank President
Luther, whom one can call the supreme protector of the currency. Equally, the best guarantee for a gradual improvement
of the still very tight financial condition of the Reich, is the
justified trust that the Reich Finance Minister enjoys at home
and abroad. In short, we can characterize the financial situation as follows: ‘We will get through with the Reich budget, without introducing new taxes and without further cutting
the wages of state employees. This means a certain progress
in comparison with the past two crisis years. The Reich government will help the states and municipalities in troubled
financial condition, through organizational and financial
measures.’ ”4
One should note here that Schleicher’s emphasis on inflation, must be seen against the background of the 1923 hyperinflation, which truly traumatized the German population, especially the middle class. Within a few months, the life’s savings
of tens of million of people simply vanished. The material
loss, and the psychological shock, are probably difficult to
imagine today, especially here in the United States.
Von Schleicher was no economist, but he understood precisely what the core problem was: overcoming the economic
depression by rapidly reducing the mass army of desperate
unemployed. Schleicher’s Dec. 15 radio address suffices to
recognize where the concept for his anti-depression strategy
came from: It came from Wilhelm Lautenbach.5
Wilhelm Lautenbach’s anti-crisis plan
Sixteen months earlier, on Sept. 16-17, 1931, a secret
conference of the Friedrich List Society had been held in
Berlin. The theme of the conference was the possibility and
consequences of expanding the issue of credit, in order to
boost German economic activity under conditions of the
world economic crisis. In addition to Reichsbank President
4. Michalka and Niedhart, op. cit.
5. cf., Wilhelm Lautenbach, Zins, Kredit und Produktion (Tübingen, 1952).
EIR
March 5, 1999
Dr. Hans Luther, some 30 leading economists, bankers, industrialists, and economic politicians participated. The keynote
speech was delivered by Dr. Wilhelm Lautenbach (18911948), a high-level official in the Reich Economics Ministry
and, although now little-known, an important economic theorist. He was a member of the Friedrich List Society and took
part in every one of its conferences during 1928-32, which
discussed issues of priority for the German economy.
Lautenbach’s memorandum was titled “The Possibilities
of Boosting Economic Activity by Means of Investments and
Expansion of Credit.” He wrote there, “The natural course for
overcoming an economic and financial emergency” is “not to
limit economic activity, but to increase it.”
Lautenbach distinguishes two emergency situations: On
the one hand, there were emergencies which “entail tasks for
production.” As an example of this kind of emergency, he
cites a war economy, the conversion from war production to
peace-time production, or the “reconstruction of Japan following the great earthquake” in 1923. On the other hand, there
were economic and financial emergencies of national and
international dimensions, in which it was clear, in general,
that “we should and want to produce more. But the market,
the sole regulator of the capitalist economy, does not provide
any obvious positive directives.”
The economic emergency of the second category—a depression and/or the collapse of the financial system—was
characterized by the “paradoxical condition” that, “despite
curtailed production, demand is less than supply and thus
leads to the tendency to decrease production further.” Under
conditions of depression, there are normally two economic
policy reactions. The first is a policy of deflation: The budget
deficit is reduced by cutting state expenditures, and prices and
wages are lowered. At the same time, credit is restricted. If
credits are not curtailed, low interest rates would lead to an
outflow of foreign capital, which endangers the exchange rate
and produces still greater scarcity of available capital for the
domestic economy. Lautenbach thought it was practically impossible to reduce taxes in a depression, because the tax base
had already contracted and public budgets were already
strained for resources. All of these measures, according to
Lautenbach, produce “new and large losses of capital for the
individual entrepreneur in commerce and industry,” making
them “uncompetitive and insolvent,” compelling a “reduction
of production and large-scale layoffs of the workforce,” and
also leading to “a deterioration of the status of the banks.”
The reduction of public expenditures is doubly counterproductive, since public contracts and mass purchasing power
are further reduced. The reduction of wages has an initially
favorable effect upon exports, but it causes a far greater reduction in demand in the domestic economy. “The adjustment to
reduced demand by correspondingly reducing prices causes
losses . . . and draws additional reductions of production in its
wake.” The thus additionally growing unemployment, effects
an acceleration of the downward spiral of the economy. Thus,
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25
Lautenbach argued, the deflationary policy will “inevitably
lead to complete economic and political catastrophe.” But, in
a depression, there are “surpluses of commodities, unused
production capacities, and unemployed labor.” The use of this
“largely unused latitude for production” is “the actual and
most urgent task of economic policy and it is simple to solve,
in principle.” The state must “produce a new national economic demand,” which, however—and this is the condition—“represents a national investment for the economy.
One should think of tasks like . . . public or publicly supported
works which signify a value-increase for the economy and
would have to be done under normal conditions in any case.”
Lautenbach was thinking primarily of transportation infrastructure in this connection (roads/highways, railroads, land
improvements, water management, etc.).
Then Lautenbach poses the question: “Since long-term
capital is neither available to us on the foreign, nor on the
domestic market, how are such projects to be financed?” And
he adds, that “reasonable public works are already neglected
due to the empty treasury in times of deep depression.” If
there is no possibility to finance the projects through the
(empty) state treasury, or through the capital markets, “the
consequence to be drawn, ought not to be, that it is not possible
to realize projects of this sort.”
But how is it possible? Lautenbach makes the initial ob-
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servation, that “liquidity is chiefly a technical organizational
issue. Banks are liquid when they are sufficiently supported
by the Reichsbank.” Lautenbach proposes that the Reichsbank give the banks a “rediscount guarantee” for the bonds for
financing “economically reasonable and necessary projects.”
Once a firm had a contract from a state agency for the realization of a project, it would get a credit line from its bank, to
pay for newly employed workers. While first using existing
machinery and inventories, the firm soon would also buy new
and additional raw materials, and also capital goods. As the
project’s realization progresses, the state agency will issue
promissory notes to the contracting firm, for which the firm
will get cash from its bank. The bank, in turn, will receive
cash from the central bank, due to the rediscount guarantee.
The central bank will prolong the promissory notes, until the
general economic recovery has sufficiently improved tax revenues, so that the state can redeem the notes.
Short-term credit financing, by means of discountable,
prolongable bonds for creating jobs and investments, has a
direct and an indirect effect. The realization of the projects,
financed by credits, signified an increase of production, with
the productive utilization of machines, raw materials, and
operating materials. The financial situation of the businesses
would relax, and thus also, the situation of their banks, and
the demand for capital goods would increase. The realization
of the projects on credit, would entail payment of wages to
newly engaged labor, which would have the effect of generating additional demand for consumption goods.
Lautenbach proceeded on the assumption, that “the stimulating effect of the primary credit expansion” for financing
infrastructure projects, would effect “a stimulating movement
in total production” in the economy. The initial boost of infrastructure and investment projects would lead to the “upward
conjuncture” of the entire economy. The utilization of unused
capacities of production would have the effect of increasing
economic productivity. The improvement of tax revenue
would enable the state to shift to a long-term management of
the original liquidity provided to pre-finance the projects.
As for the fear that credit-financing of infrastructure projects would incur the risk of inflation, Lautenbach says that
such projects are “rational and unobjectionable from an economic standpoint.” These projects represent “in a material
sense, real economic capital formation.” The credit-financing
would result in the creation of real economic values. Lautenbach further emphasizes that the expansion of credit and the
expansion of production in infrastructure projects are disproportional. “The extent and rate of the expansion of production” grow at much higher rates than the “degree and rate of
credit expansion.” Here, Lautenbach was apparently thinking
of a “productive multiplier effect.”
In summary, Lautenbach says, “By means of such an investment and credit policy, the disproportion of supply and
demand on the domestic market will be alleviated and thus
total production once more provided with a direction and a
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March 5, 1999
goal. If we neglect to undertake such a policy, we will inevitably be heading in the direction of continuing economic disintegration, and a complete disruption of our national economy,
into a condition in which, then, in order to avoid domestic
political catastrophe, one will be compelled to undertake a
strong increase of new short-term public debt for purely consumptive purposes, while today we have the instruments, by
means of utilizing this credit for productive tasks, to bring
both our economy and our public finances into balance once
more.”6
I should note here, that one well-known German economist at the time, was not invited to the conference where
Lautenbach spoke: Hjalmar Schacht. The Friedrich List Society knew who Schacht and his Anglo-American banker
friends were, and they knew that they were in deadly opposition to Lautenbach’s ideas. Already in 1928, the leadership
of the Friedrich List Society had signalled to Schacht that
he would not be welcomed in this organization. While the
conference proceedings were kept confidential, news of it did
leak out to London and New York. Benjamin Anderson, the
chief economist of Chase National Bank in New York, wrote a
vitriolic attack against the “public works” debate in Germany,
denouncing it as a violation of the Young Plan provisions for
the German war reparation debt.
It is equally noteworthy, that until the late 1970s, Lautenbach was well known in academic economics departments
and economic policymaking circles in Germany, who knew
that much of what was known as “enlightened Keynesianism”
during the 1950s and 1960s, in reality stemmed from Lautenbach. Opposite to Keynes, Lautenbach was solidly anchored
in a physical-economic conception of the economy. There
does exist a significant corpus of economic literature on
Lautenbach, mostly from the 1950s and 1960s. And the American economist and historian Charles P. Kindleberger, in his
standard work on the Great Depression, gives objective and
positive coverage to Lautenbach, as well as to Wladimir Woytinsky, a co-thinker of Lautenbach who worked for the German trade union movement.7
The trade unions’ public works program
In late 1931, economic policy concepts for a state-directed, large-scale job creation program, parallel to that of
Lautenbach, began to be articulated in the German trade union
federation (ADGB). The most significant economist of the
ADGB was Wladimir Woytinsky, head of the federation’s
statistical department, and a member of the Friedrich List
Society. Woytinsky had come to Germany in 1922 from Russia, seeking asylum from the Communist regime. (After 1933,
he moved to the United States and became an American citi6. Knut Borchardt and Otto Schötz, Wirtschaftspolitik in der Krise, Die
Geheimkonferenz der Friedrich-List-Gesellschaft vom September 1931, (Baden-Baden, 1991).
7. Charles P. Kindleberger, Die Weltwirtschaftskrise (Munich, 1973).
EIR
March 5, 1999
zen.) The trade union leader Fritz Tarnow, and Fritz Baade,
an SPD member of the Reichstag and expert on agricultural
policy, supported Woytinsky.
On Dec. 23, 1931, Baade, Tarnow, and Woytinsky presented their “Theses on Combatting the Economic Crisis” to
the ADGB’s executive board. In this document, the three
state: “We fear that irrationality in the world economy, and
in world policymaking, has already assumed such proportions, that effective anti-crisis measures on the international
level will not come about as speedily as is necessary for Germany to survive.” Therefore, they present a “concrete program for combatting the crisis within the framework of the
German economy,” the central feature of which is “the employment of 1 million unemployed, in public works projects.
. . . The creation of jobs will spark a revival of the consumer
goods industry, thereby drawing a further, considerable number of unemployed back into employment. . . . A sum of approximately 2 billion reichsmarks would be required to finance these public works projects. Whatever portion of this
amount cannot be raised by any other means, must be made
available via a cash loan from the Reichsbank. . . . Such a
one-time cash loan of a fixed amount, linked to a stipulation
that it be used for job creation, poses no danger of a repeat of
the runaway inflation of 1922-23. The guarantee against such
inflationary effects, lies not in its fixed amount and restrictions
on its use, but rather primarily in the fact that today, we have
a huge amount of unutilized capacity in our productive apparatus. Consequently, increases in production can, without difficulty, follow along in the wake of planned increases in purchasing power.”
These theses were incorporated into the final “WTB
Plan,” the job creation program, named after the initials of its
three authors. The plan was presented on Jan. 26, 1932. It
further elaborated the financing question: “The plan should
ensure the rapid reabsorption of approximately 1 million unemployed back into the production process. In order to
achieve this goal, the Reichsbahn, Reichspost, and municipal
and other bodies, must issue contracts on a scale sufficient
to create employment, directly or indirectly, for 1 million
unemployed persons. . . . The contractees will receive an
equivalent long-term loan at a low rate of interest and amortization, against promissory notes which are paid out by
Reichskredit AG (or other suitable institutions) and are rediscountable at the Reichsbank.”
We may add here, that the SPD leadership rejected the
financing part of the WTB Plan as being inflationary, insisting
on “traditional” financing through tax revenue or state bonds.
The chairman of the trade union federation ADGB was
Theodor Leipart, who in early 1930 had given the original
assignment to Woytinsky to work out a job creation program
for the trade unions.
Leipart also had regular discussions with Gen. Kurt von
Schleicher. Why would one of the German Army’s most senior officers engage in a long-standing contact with a trade
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27
union leader? Why would this military man, as Chancellor,
present a state-directed work creation program, which no
other politician—left, right or center—had dared to touch?
Von Schleicher’s career
To answer this question, we have to sketch a bit more,
what kind of personality Schleicher was, and who were his
circle of friends and acquaintances. Born in 1882, Schleicher
came from a typical, not-wealthy noble family in Prussia, in
which it was almost self-evident that the sons would follow a
military career. In World War I, Schleicher became the protégé of Gen. Wilhelm Groener, the central figure for logistical
operations in the Supreme Army Command. On the government’s side, the chief logistical-industrial administrator was
Walter Rathenau. Toward the end of the war, Groener held,
after Field Marshal Hindenburg, the second most important
position in the military command, that of First General Quartermaster. It was Groener, with Schleicher as his “right hand,”
who brought about, in the weeks after Nov. 9, 1918, the “historical compromise” between the Army command and Germany’s new Republican leaders, most notably the first Social
Democratic President, Friedrich Ebert. This understanding
between the Army and the new state leaders, prevented Germany from descending into utter chaos and civil war during
the period 1918-21, and again during the hyperinflation period of 1923, with the ensuing Communist upsurges and the
first revolt by Hitler on Nov. 9, 1923 in Munich.
Groener retired form the Army in 1920, and Schleicher
became the head of the Military-Political Affairs Department
in the Defense Ministry under Gen. Hans von Seekt, the formative leader of the Reichswehr until 1926. From the beginning, Schleicher was deeply involved in the secret cooperation of the Reichswehr with Soviet Russia; he knew
personally most of the leading Soviet military and foreign
policy figures. After Seekt had to retire in October 1926,
Schleicher became the dominant “political-military affairs”
figure in the Defense Ministry, who coordinated the policies
among the Defense Minister, the Army leadership, the offices
of the Chancellor and Reich President, who since 1925 had
been Field Marshal Hindenburg, and the parliament, the
Reichstag.
Schleicher also had close contacts with the two outstanding foreign ministers of the Weimar Republic, Walter Rathenau, who was assassinated in 1922, and Gustav Stresemann, who died in 1929. When, in 1931, André FrançoisPoncet became French Ambassador in Berlin, Schleicher developed an unusually close relationship with him. Historical
documents clearly show, that Schleicher advocated a “continental” strategy, with special relationships to France and
Russia.
In June 1932, Schleicher became Defense Minister.
Schleicher had a reputation as a “social general”—some, less
charitably, dubbed him “the red general”—and this had occurred well before his famous July 26, 1932 speech, in which
28
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he declared that the Reichswehr was neither “the military
arm of a single party,” nor “the protector of any one class or
interest,” nor did it wish “to protect outmoded economic
forms or untenable property relations.” Also, he considered
it his highest duty, “to relieve misery, precisely in those layers
of the population that are the poorest.”8
The banking crisis in summer 1931
By 1929, the First World Financial Crisis had fully set
in. On Oct. 25, 1929, the bloated Wall Street stock market
crashed. But already in June 1929, it had become evident that
the whole world financial system was moving into disintegration, because the complex system of German war reparations
payments—the financial “fuel” on which the working of the
system depended—had become unmanageable. Between
1919 and 1929, Germany had paid directly, in kind, or through
private losses (confiscation of private property outside Germany), 47 billion reichsmarks. Of this, some 17 billion were
formally recognized by the Versailles powers as direct financial reparation transfers. But, following the 1923 hyperinflation and the ensuing 1924 Dawes Plan, which set Germany’s
total reparation obligations at 134 billion reichsmarks, a major
chunk of the German debt transfers was financed through
credits by Anglo-American banks. Knowing that Germany
could not domestically generate the funds necessary to service
its reparation debts, credits flowed to Germany and, from
there, back to their places of origin, namely, New York and
London—just as happens today with so-called IMF bailout
packages to Southeast Asia, Russia, or Brazil.
In 1931, the whole Versailles reparations-centered system
collapsed, and the center of the financial earthquake was Germany. There exists a fascinating, 167-page inside account of
the breakdown of the German banking system in the summer
of 1931, written in 1939 by the former State Secretary in the
Reich Finance Ministry, Hans Schäffer.9
Since the October 1929 crash on Wall Street, there had
been an increasing hemorrhage of foreign, mainly American,
financial investments from Germany. But the German banking crisis of 1931 started in Austria. On May 11, 1931, Austria’s largest bank, the Vienna Kreditanstalt, went bankrupt,
which triggered a broad run on banks in Austria, across central-eastern Europe, and in Germany. The Kreditanstalt bankruptcy triggered a massive capital flight out of Austria, which
brought that country rapidly to the brink of default. Triggered
by the “Austrian crisis,” capital flight from Germany accelerated during June 1931.
On June 17, rumors began to circulate that one Germany’s
major banks, the Darmstädter und National Bank (Danat
Bank), was having financial problems. These rumors, in turn,
8. Friedrich-Karl von Plehwe, Reichskanzler Kurt von Schleicher (Esslingen, 1983).
9. “Hans Schäffer, Marcus Wallenberg und die Deutsche Bankenkrise 1931,”
unpublished manuscript, Archiv Edmund Steinschulte, Wiesbaden.
EIR
March 5, 1999
further accelerated the capital withdrawals from Germany.
An uncontrolled chain reaction of bankruptcies, starting from
Germany, was about to engulf the whole international financial system. If Germany’s banks defaulted, the whole house
of cards built around the war reparations would collapse.
In this situation, on June 20, 1931, U.S. President Herbert
Hoover announced a one-year moratorium on all sovereign
reparations and inter-Allied war debt obligations. Had the
moratorium been declared three years earlier, it might have
stabilized the situation, but at this point, it came too late.
Then, on June 25, 1931, a short-term emergency credit
line of $100 million was opened for Germany by the Bank of
England, the Federal Reserve, and the Banque de France. But,
these actions could not stop the capital flight out of Germany,
which drove the country ever closer to default. On July 6,
1931, it became clear that the Danat Bank had indeed had
very serious financial problems. On July 13, the bank closed
its doors. Reichsbank President Luther flew to London, asking
for a $500 million credit line. Up until July 21, senior American, British, French, and German central bank and government officials held crisis meetings in London. But, Montagu
Norman, the governor of the Bank of England, declined to
provide further credits to Germany, and, as a result, the others
declined as well.
On July 13, 1931, the day Danat Bank closed, a bank
holiday was declared in Germany, which lasted until Aug. 5.
Beginning July 18, ever more extensive currency and capital
controls were implemented. On Aug. 1, foreign deposits in
Germany were frozen temporarily. By then, it had become
clear that also Dresdner Bank, and its subsidiaries, Deutsche
Orientbank and Deutsch-Südamerikanische Bank, were close
to insolvency. Danat Bank and Dresdner Bank were put under
state administration, and provided with emergency liquidity
by the Reichsbank. Later, in September 1931, Deutsche Bank,
Disconto Gesellschaft, and Commerzbank also came under
state administration. Without this, and the pumping of massive amounts of liquidity by the Reichsbank into the financial
system, in the dimension of at least 1 billion reichsmarks, all
of Germany’s leading banks would have defaulted. Please
note here, that on Sept. 16-17, 1931 the above-mentioned
conference of the Friedrich List Society, with Wilhelm Lautenbach’s keynote address, was taking place.
By August 1931, the financial chaos in Germany began
to radiate into Britain. On Aug. 24, the Labour government
fell, and then the so-called National Government (Tories, Liberals, and a minority faction of Labour) under Ramsay MacDonald, was formed. On Sept. 21, 1931, Britain abolished the
gold standard. By the end of 1931, the British pound had been
devalued by 40%.
By that time, it had become clear that the German reparations-centered world financial system had indeed disintegrated. The pretense that this system could, somehow, be kept
going, had become unsustainable. The Bank for International
Settlements (BIS), about which I will say more later, declared
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March 5, 1999
politely that the Young Plan had become somewhat unrealistic. Three days before the Hoover debt moratorium was to
have ended, on June 17, 1932, an international conference on
the Versailles reparations began in Lausanne, Switzerland.
The conference ended on July 8, 1932, with the formal termination of Germany’s war reparation obligations. Five years
earlier, this would have shaken the world in a positive way;
now it was almost meaningless, because the world economy
and world finances lay in ruins.
German politics, 1930-32
Therefore, the abolition of the Versailles war reparation
system meant no “happy ending.” By that time, the hegemonic
Anglo-American financial establishment had already concluded that the world financial crisis, plus world depression,
which had been caused by the Versailles reparations system,
made the installation of dictatorial or quasi-dictatorial political regimes necessary. In the country with the worst economic, financial, and social conditions, Germany, the most
totalitarian system would have to be installed. The course of
events in Germany between 1930 and 1932 had been such,
that the “Hitler project” became a realistic option.
In 1930, the economic situation in Germany had deteriorated rapidly. Unemployment went above the 3 million level.
The political effect was immediate: In the Reichstag elections
of May 1928, the Nazi Party had received 2.6%; now, in
the national elections of September 1930, the Nazis received
18.3% of the vote. The Communists increased their vote from
10% to 13%. The non-radical right-wing parties and the liberal center parties lost catastrophically. In March 1930, the
center-left Grand Coalition government under Chancellor
Hermann Müller broke apart. From then on, there were no
more parliamentary governments in Germany. The Chancellors—Heinrich Brüning, Franz von Papen, Kurt von
Schleicher, and Adolf Hitler—did not lead governments
based on a majority in parliament. The Chancellors were
named by Reich President Hindenburg, based on the provision for emergency status of the Weimar constitution (Article
48), and ruled by emergency decree. The governments were
“Präsidialkabinette,” more or less independent from parliament.
Still, parliamentary sessions were held, and a Reichstag
majority could still vote down the emergency decrees. But a
majority of Nazis, Communists, Social Democrats, the Catholic Center, and the right-wing parties, was an improbable
proposition. Mostly, the Präsidialkabinette were tolerated by
the Social Democrats, the Catholic Center Party, and the now
small right-liberal parties. When the tensions between the
Reichstag, and the Chancellor and his government, became
too intense, the Reichstag was dissolved by the Reich President, which is why there were still free elections between
1930 and 1933.
Under these conditions, between 1930 and 1933, the institutional power center in Germany was the Reich President,
Feature
29
and this power was really based on the Army. The 100,000
soldiers of the Reichswehr, without an air force, armor, or
heavy artillery, could not match the military strength even of
Poland, Czechoslovakia, or Belgium, not to speak of France
or Britain. But, in domestic political terms, the Reichswehr
was a power factor. In the Army structure, Schleicher had
gained a unique position, and he was the most political one
within the Army command.
Brüning’s Presidential government was toppled on May
30, 1932. He was ousted at the very moment that he began
to shift away from his earlier, brutal deflationary austerity
policies. Brüning’s emergency decree of Dec. 8, 1931 had
lowered wages to either the level of 1927, or a maximum
wage reduction of 10%; standard prices and rents for housing
were likewise cut by 10%; and a 6% ceiling was imposed on
interest rates. After the announcement of the Dec. 8, 1931
emergency decree, Brüning’s Finance Minister explained that
what the German people were being asked to do, had pushed
them to the very limit of their tolerance and willingness to
sacrifice. Wages and salaries could not be reduced any further
than the new emergency decree already had done, because
otherwise the government would face the specter of serious
threats to the state and to society at large. Brüning himself
said, “The emergency decree is an absolutely integrated
whole, from which no individual part can be subtracted. As
of this moment, we are marking an end to the deflationary
policy that has been forced upon us.”
Brüning envisaged an economic policy-shift, once the
reparation issue would be out of the way by mid-1932. Indeed,
that happened just six weeks after he was ousted. He was
toppled and replaced by Franz von Papen, a person as shallow
as he was devious. We shall soon see, what a treacherous role
von Papen will play in December 1932 and January 1933.
But, Papen had one great advantage: Hindenburg liked him
very much. The probable reason for this, was that Papen had
cultivated a close personal relationship to Hindenburg’s son,
Oskar von Hindenburg. As we shall see, catastrophic consequences derived from this.
One of von Papen’s very first acts as Chancellor was to
enact even more ruthless emergency cuts in social services
and wages. He lifted the ban on the National Socialist paramilitary organizations, the SA and the SS, which had been outlawed under Brüning, and dismissed the Social Democratic
state government of Prussia, to make himself the Reichskommissar for Prussia.
We must note here, that General von Schleicher played a
highly dubious role in the transition from Brüning to von
Papen. Schleicher committed a mistake of the gravest sort, by
actively playing along with the political maneuvers through
which Papen became Chancellor. Obviously, Schleicher
thought that that was the price he had to pay for becoming
Defense Minister. But it was to cost him, and Germany,
dearly.
Papen was Chancellor from June 1, 1932 to Nov. 17, 1932.
30
Feature
On July 31, 1932, there were elections for the Reichstag. At
that time, unemployment in Germany stood at 29.9%, just
below 6 million. The production index (1928=100) stood at
58. The July election produced a breakthrough for the Nazis:
They more than doubled their vote to 37.2% and had the
largest faction in the Reichstag, with 230 deputies. As Papen
governed on the basis of a Presidential decree, and there was
no majority in the Reichstag for forming an alternative government, Papen stayed on as Chancellor after the July elections. But, he immediately tried to take Hitler into his government, offering him the post of Vice-Chancellor. Hitler
refused, and demanded that he be made Chancellor.
On Aug. 13, 1932, Hindenburg received Hitler, who again
demanded to be named Chancellor and to receive “full state
power.” But, Hindenburg categorically rejected this.
In the late summer of 1932, the economic situation in
Germany further deteriorated. On Sept. 4, Papen introduced
yet another emergency decree, imposing even more vicious
austerity measures. When, on Sept. 12, 1932, the Reichstag
convened, the Communists introduced a motion for abolishing Papen’s austerity decree. The motion was voted up 51242, the most massive defeat ever for a government in the
whole Weimar period. In response, Papen, with Hindenburg’s
formal backing, declared the Reichstag dissolved. New
Reichstag elections were set for Nov. 6, 1932. Hitler was
confident that the new elections would bring him further
gains, which would finally undermine the resistance to his
becoming Chancellor and getting “full state power.”
But, the opposite happened. The Nov. 6, 1932 election
results turned out to be a disaster for Hitler. The Nazi Party lost
2 million votes, and 36 deputies in the Reichstag, compared to
July. A weakened Hitler met again with Hindenburg, and
again he demanded to be named Chancellor. On Nov. 24,
1932, Hindenburg wrote him a nasty letter, saying that a Presidential Cabinet, led by Hitler, would inevitably lead to a
“party dictatorship,” and that the Reich President’s constitutional oath and his conscience would not allow that to
happen.10
Schleicher now made his move. He saw the chance to first
get rid of von Papen, and then to turn against the weakened
Hitler. Papen was totally isolated, as indicated by the Sept.
12 Reichstag vote, when effectively all parties voted against
him. On Nov. 17, 1932, von Papen resigned. Hindenburg,
reluctantly, named Schleicher as the new Chancellor.
Von Schleicher becomes Chancellor
On Dec. 2, 1932, Schleicher becomes Reichs chancellor.
He immediately repeals the brutal austerity decrees of Papen
and energetically moves ahead with his public works program, as we heard earlier from Schleicher’s national radio
address of Dec. 15, 1932. Schleicher cannot count on the
10. Michalka and Niedhart, op. cit.
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March 5, 1999
parties in the Reichstag backing him. He talks to all of them,
including the Nazis. Individual deputies support him, but
none of the party factions gives him a firm backing. He
reaches an agreement with the parties, that the Reichstag will
“pause” until January. But, as Schleicher heads a Presidential
Cabinet, he does not depend on the Reichstag. Who, then, is
backing Schleicher?
∑ The Reichswehr. Schleicher has the full backing of
Gen. Kurt von Hammerstein-Equord, the chief of Army
Command.
∑ Important elements in the civilian state bureaucracy,
notably the State Secretary in the Chancellor’s Office, Erwin
Planck, the son of Max Planck. Also important is Günther
Gerecke, the influential chairman of the Association of Rural
Municipalities. Gerecke became Schleicher’s Reich Commissioner for Public Works.
∑ The trade unions. Theodor Leipart, the head of the
ADGB trade union federation, fully backs Schleicher’s public
works program, which largely corresponds to the ADGB’s
“WTB Plan.”
∑ Some elements within the Social Democracy, notably
the former Prime Minister of Prussia, Otto Braun, and Gustav
Noske, then chief administrator of the Hanover region. Also
supportive is the Reichsbanner, a Social Democratic-oriented
republican mass organization, with certain paramilitary features.
∑ An important group of industrialists and bankers, including:
—Otto Wolff, of the Cologne-based steel and trading
firm;
—the industrialist Arnold Rechberg, with important
ties to France and the Benelux countries;
—the banker Wilhelm Regedanz, with strong ties to
France and central-eastern Europe.
One should not forget, also, that Schleicher has good ties
to France and Soviet Russia. Right after becoming Chancellor, in early December, Schleicher met with Soviet Foreign
Minister Litvinov, with whom he discussed a further intensification of economic cooperation with Russia. Schleicher’s
ties to France, through Ambassador François-Poncet, were
cordial as well.
I think it is useful here, to report what the American government’s attitude toward von Schleicher was. U.S. policy
toward Weimar Germany was always torn between America’s genuine national interests and the interests of the Morgan
complex. But, in late 1932 Ambassador Frederic Sackett was
clearly positive toward von Schleicher. Basing himself on the
diplomatic messages from the Berlin embassy to the State
Department, Bernard Burke writes: “American diplomats,
who earlier had very little positive to say about Schleicher,
were impressed by the general’s determined efforts to get
broad backing for his government. Sackett was won over
when the general solicited the support of the trade unions.
Strangely, Sackett and his staff, who surely would not support
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March 5, 1999
Gregor Strasser, the Nazis’ “organization man,” until he resigned
all his posts in 1932. When von Schleicher’s effort to use Strasser
to split the Nazi Party failed, bankers Schacht and von Schröder
moved in to provide support to Hitler.
trade union activity at home, found trade union leadership the
most politically attractive group in Germany. . . . Sackett took
heart as Schleicher succeeded in broadening his base of support. But nothing gladdened him more than the general’s attempt to split the Nazi Party. . . . Sackett expressed pleasure
that Schleicher, who was often called the ‘friend of the workingmen,’ was going to address the problem of unemployment
relief as the principal goal of his cabinet. . . . Sackett approved
of the general for the enemies he made. . . . Sackett betrayed
his new-found admiration for the general when he pointed out
that the calm was made possible by ‘the tact and skill with
which Chancellor von Schleicher dealt with the situation, in
striking contrast to the provocative methods of his predecessor [von Papen].’ ”11
In contrast, the British Foreign Office, and British intelligence, had a thoroughly hostile attitude toward von
Schleicher. John Wheeler-Bennett, the Foreign Office “Germany expert,” entertained a lasting hatred of him. WheelerBennett would later become infamous for expressing his satisfaction that the Gestapo had killed the German resistance
leaders of July 1944, in a memorandum to Winston Churchill.
The extermination of the German resistance, wrote WheelerBennett, had ensured that these German elite figures would
not represent a problem for the occupying powers of postwar
Germany. Already in his 1934 book, The Disarmament Dead11. Bernard Burke, op. cit.
Feature
31
lock, Wheeler-Bennett denounced von Schleicher as an evil
intriguer.
The Nazi Party plunges into crisis
After its defeat in the Nov. 6 Reichstag elections, the
Nazi Party was in state of depression and disarray. Schleicher
intended to exploit this, and to split the Nazi Party. This might
look like a very dubious proposition, but there were substantial reasons for trying it. What a wretched state the Nazi Party
was in during November and December 1932, is revealed by
Josef Goebbels’s diaries:
Nov. 6: “We have suffered a defeat. . . . The main thing
now is to consolidate the organization and to improve the
mood in the party.”
Nov. 10: “Back to Berlin. The strong mood in the party
has changed into ugly depression. Everywhere just anger,
fights, and conflicts.”
Nov. 11: “I get a report of the financial situation of the
Berlin party organization, it’s desperate. Just ebb, debts, and
financial obligations, in addition the complete impossibility
to raise large amounts of money after this defeat.”
Dec. 6: “The [party] situation in the Reich is catastrophic.
In Thüringia we lost 40% since July 31.”
Dec. 8: “In the organization, there is real depression. We
are depressed because there is the danger that the party might
fall apart. . . . The Führer says: If the party disintegrates, it
will take me three minutes to finish all with my pistol.”
Dec. 12: “It takes a great effort to keep the SA and the
party functionaries on a clear course.”
Dec. 23: “1932 has been a string of bad luck, just forget
about it. . . . I sit alone here and I am thinking about so many
things. The past was so difficult, the future is dark and foggy,
all perspectives and hopes seem to have vanished.”
Goebbels had very real reasons to be depressed, not just
because of the horrible state of the party finances. On Dec.
8, 1932, Gregor Strasser resigned from all his party posts.
Strasser had been a key “organization man” in the Nazi Party
since 1924. He had pushed for some sort of “social orientation.” Strasser could credit himself with having played a major role in the party’s massive gains in the July 1932 Reichstag
elections. It had been he, who had authored an “employment
action program,” as part of the Nazi election platform. He
even had publicly supported the ADGB’s job creation program, and positively referenced Woytinsky, who was Jewish,
in a Reichstag speech. After the July elections, Hitler had
banned the Strasser program, and ordered remaining copies
of it destroyed.
Also, during December 1932, an inner-party revolt began
to brew in various party sub-organizations, notably in Bavaria. In the first days of December 1932, Schleicher met
secretly with Strasser and offered him the Vice-Chancellorship. Strasser was open to the proposal. But Hitler was informed about the Schleicher-Strasser meeting, and immediately branded Strasser a traitor. Hitler kicked Strasser out of
32
Feature
the party, and called a series of emergency meetings of leading
party functionaries. Hitler had to threaten to commit suicide,
if the party leaders would not unconditionally submit to his
absolute command. Hitler’s gamble only worked, because
Strasser remained strangely passive. He did not stand up
against Hitler; instead, he took a vacation in Italy.12
But, as Goebbels’s diaries confirm, by Christmas, the situation in the Nazi Party was not yet back under control, even
though Schleicher’s ploy to split the Nazi Party through Strasser had clearly failed. But then, like dei ex machina, rescue
came for Hitler, in the persons of Hjalmar Horace Greeley
Schacht and the banker Baron Kurt von Schröder. Why would
these two figures be in a position to carry through an action,
which shifted a most promising situation for von Schleicher?
Schacht, Norman, and the Morgan complex
To answer that question, it is necessary to take a closer
look at Schacht and von Schröder. Schacht was born in 1877
in Denmark, the son of a naturalized American father.
Schacht’s father returned from the United States the year his
son Hjalmar Horace Greeley was born; for 30 years, he
worked as a senior executive for the German branch of Equitable Life Insurance.13
Hjalmar became the Anglo-American financial establishment’s “man in Germany” ever since, in November 1923,
the Allied Reparation Commission decreed that he would
become the head of the Reichsbank. Schacht was installed
against the unanimous opposition of the Reichsbank staff. At
that time, Schacht was on the executive board of the Danat
Bank, which, as mentioned above, became infamous in the
1931 banking crisis.
On Dec. 22, 1923, Schacht formally became president
of the Reichsbank. One week later, he was in London for
extensive meetings with Montagu Norman, the governor of
the Bank of England. The meetings between Norman and
Schacht were regular, to say nothing of their almost daily
correspondence and telephone conversations. As late as 1939,
Norman came to Germany to become the godfather of one of
Schacht’s grandchildren. Montagu Norman was the towering
figure of the City of London, a diabolical personality with
enormous influence over the course of events, financial and
political, from World War I into World War II.14
Montagu Norman had the most intimate connections to
the J.P. Morgan financial-political complex, which, during
the 1920s, included J.P. Morgan and Company in New York,
Morgan Grenfell and Company in London, and Morgan et
Compagnie in Paris. To call “Jack” Morgan, who headed the
Morgan complex from World War I into the late 1930s, an
12. Henry A. Turner, Hitler’s Thirty Days to Power (Reading, Mass., 1996).
13. Heinz Pentzlin, Hjalmar Schacht (Berlin, 1980).
14. F. William Engdahl, A Century of War: Anglo-American Oil Politics
and the New World Order (Wiesbaden: Böttiger Verlag, 1992).
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March 5, 1999
Hjalmar
Schacht with
Hitler in
1934. With
backing from
Montagu
Norman, the
governor of
the Bank of
England,
Schacht
arranged
financing for
Hitler’s
march to
power.
“Anglophile,” is a vast understatement; he was an integral
part of the British establishment. “Jack” Morgan passionately
hated Germans, Jews, and Catholics. The Morgan complex
ensured that the British Empire made it financially through
the war, and he exerted the probably decisive political influence on the U.S. government for joining the war on the side
of the Allies in 1917, when Russia and France were close
to military collapse, and the British Empire came near to
financial-economic exhaustion.
The Morgan complex stood at the center of the interAllied war debt structure, and consequently played the key
role in erecting and managing the Versailles reparations system, the prime purpose of which was to service the interAllied war debt.15
The key figures in managing the Versailles reparations
system were either directly Morgan executives or closely tied
to the Morgan complex:
∑ Thomas W. Lamont, “Jack” Morgan’s right-hand man;
∑ Charles Gates Dawes, after whom the 1924-29 Dawes
Plan was named;
∑ Parker Gilbert, the Allied Reparations Agent, residing
in Berlin from 1924-29, with enormous powers over Germany’s financial affairs;
∑ Benjamin Strong, the head of the New York Federal
Reserve, another intimate of Montagu Norman;
∑ George Harrison. who succeeded Strong in 1928;
15. Ron Chernow, The House of Morgan: An American Banking Dynasty
and the Rise of Modern Finance (New York: Atlantic Monthly Press, 1990).
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March 5, 1999
∑ Owen Young, after whom the Young Plan was named;
∑ Andrew Mellon, the Treasury Secretary.
For the City of London/Morgan complex, Schacht—
“their man”—ran Germany’s finances—and politics—from
1924 on, to an extent that is difficult to imagine today. The
1924 Dawes Plan, which Schacht had worked out with Norman, Lamont, Dawes, and Gilbert, stipulated that Germany
had to pay 134 billion reichsmarks in war reparations over
the next 36 years, of which 22 billion had to be paid by 1928.
After lengthy negotiations, in 1929, the Dawes Plan was superseded by the Young Plan, which, seeming to be more “realistic,” stipulated that Germany had to pay 34 billion reichsmarks over the next 59 years, until 1988. Schacht negotiated
and signed the Young Plan treaty for Germany, which included the formation of the Bank for International Settlements, for administrating the Young Plan reparation payments.
However, then, in late 1929, Schacht made a seemingly
odd turn-around. Suddenly, he proclaimed that the Young
Plan, which he himself had signed, was an unacceptable burden for Germany, for which he could not take responsibility.
On March 7, 1930, Schacht resigned as president of the
Reichsbank.
What had happened? Between the signing of the Young
Plan treaty in the summer of 1929, and his resignation from
the Reichsbank, on Oct. 25, 1929, Wall Street had crashed.
Since the crash, the credit lines extended to Germany, mostly
from America, with which Germany had paid a major chunk
of its reparation obligations back to London and New York,
had dried up. Credits were repatriated to the United States,
instead of flowing into Germany, as they had done between
1924 and 1929.
Schacht knew that the Young Plan had indeed become
very unrealistic, because, in the conditions of the rapidly escalating world financial crisis, squeezing reparation payments
out of Germany would become increasingly difficult, as the
American “buffer credits” dried up. Secondly, as long as there
was no new type of dictatorial regime in Germany, it would
not be possible to enforce the necessary “fiscal discipline” and
austerity, to extract more from the country. This conclusion by
Schacht was not the product of his personal ingenuity; it was
the view held in the top echelons of the Anglo-American
financial establishment.
Schacht goes for the ‘Hitler project’
Two weeks after Schacht’s resignation, on March 23,
1930, the last parliamentary government in Weimar Germany, the “Grand Coalition” under Social Democratic Chancellor Hermann Müller, collapsed. It was replaced by the first
“Presidential government,” that of Heinrich Brüning. In the
next Reichstag elections, on Sept. 14, 1930, the votes for the
Nazi Party exploded from 2.6% (in 1928) to 18.3%!
The next day, Sept. 15, Schacht was in London for meetings with Montagu Norman. From England, Schacht proFeature
33
Hjalmar Schacht
(center) in the dock at
the Nuremberg Tribunal.
He was acquitted, due to
intervention by the
London-based financial
oligarchy—although
without his intervention,
the Nazis would never
have come to power.
ceeded to New York, where he stayed for some weeks, meeting his friends on Wall Street. When Schacht came back to
Germany, he pursued a clear and determined policy line: Get
on with the Hitler project! In late December 1930, Schacht
had a first personal meeting with Hermann Göring. On Jan.
5, 1931, there was a memorable evening dinner at Göring’s
home, which lasted for several hours. Present were: the
Göring couple, Goebbels, Fritz Thyssen, Schacht, and Adolf
Hitler.
A few months later, on Oct. 11, 1931, Schacht for the first
time made a joint appearance with Hitler at a public event,
the infamous Bad Harzburg meeting. At roughly the same
time, Schacht arranged the visit to London of Alfred Rosenberg, the chief Nazi ideologue, who met Norman and the
publisher of the London Times, Geoffrey Dawson. In Germany, Schacht systematically organized support for Hitler in
the business milieu. As he himself stated, it was tough work,
but he made slow progress. Schacht knew he had the full
backing of the Anglo-American financial establishment, and
of Montagu Norman in particular. For them, the situation in
Germany, financially and politically, had become “unmanageable,” unless a brutal dictatorship were rammed through.
Hitler was the only credible candidate for a German dictator.
pushed the Hitler project: Baron Kurt von Schröder, who
headed the German branch of the international Schröder financial complex. That complex included Schroeder Bank in
the City of London, and the New York investment bank
J. Henry Schroder. Baron von Schröder was well acquainted
with the Nazi Party’s finances: In November 1932, he told
business friends in the Ruhr region, that the Nazis had shortterm debts of up to 30 million reichsmarks. A few weeks later,
Schröder had made sure that the Nazis’ financial problems
had improved dramatically. As we shall see, Schröder also
made a decisive political intervention, to save the “Hitler
project.”
The third key business figure in Germany who was pushing the “Hitler project” was Fritz Thyssen, who had made
financial contributions to Hitler since 1923. That financial
support was greatly expanded after 1930. Thyssen was one
of the mere handful of figures in the upper echelons of German
industry, who did support Hitler before 1933. Hitler’s first
appearance before a large group of businessmen only occurred after January 1932, when Thyssen and Schacht arranged for him to address the Düsseldorf Industry Club.
Among Thyssen’s international financial connections, the
American firm Brown Brothers Harriman of New York,
played an important role.16
Baron Kurt von Schröder
To accomplish this strategic perspective, Schacht had in
Germany an active collaborator in high finance, who equally
34
Feature
16. Anton Chaitkin and Webster G. Tarpley, George Bush: The Unauthorized Biography (Washington, D.C.: Executive Intelligence Review, 1992).
EIR
March 5, 1999
of the political situation. Dr. Schacht
agreed with me. . . . Just now [Baron
Schröder] called me, and told me he met
with von Papen. . . . Papen sees a quick
change in the political situation as being
possible and necessary, and supports
your becoming Chancellor. Von Papen
would like to have a confidential meeting with you, to analyze what has happened and to talk with you over how to
shape the political situation now. . . . It
has been proposed to have such a meeting in Baron Schröder’s house in Cologne; he is absolutely reliable. Even if
many see the current political circumstances as not favorable, I remain convinced that we can reach our aims without having to go for elections again.”18
What was the political situation
when these letters were written?
Schleicher was Chancellor, his public
works program was going ahead with
great political resonance. The internal
situation of the Nazi Party remained
Banker Kurt von Schröder and his home in Cologne, where Hitler met secretly with Franz
critical, even though Schleicher’s atvon Papen on Jan. 4, 1933. With the help of Hjalmar Schacht and von Papen, Schröder
orchestrated a plot to bring Hitler to power by “legal” means.
tempt to split the party through Strasser
had failed.
Hitler knew that he had no chance
to gain a majority in elections, which would make him ChanThe Schacht-Schröder plot
cellor. Were he to try to grab power by illegal means, the
In 1948, Schacht would have the chutzpah to declare beReichswehr would move in, and crush him. The chief of the
fore a de-nazification court, concerning his attitude to Hitler
Army command, General Hammerstein-Equord, had personin 1932: “The only choice was between a military [Schleicher]
ally told Hitler in December 1932, if you try a coup by illegal
government, coming to power by breaking the [Weimar] conmeans, “I’ll give the order to shoot!”
stitution, or Hitler becoming Reich Chancellor. Faced with
So, and here we come to the core issue: Hitler had to
these two alternatives, and based on my whole democratic
get the Chancellorship by “legal” means, which meant that
identity, I had spoken out against a military government and
Hindenburg—who, twice in the past six months, had rudely
for the formation of a cabinet by the National Socialists.”
rejected Hitler’s bid—would have to name him as his choice
Back to Schacht’s and Baron von Schröder’s activities,
for Chancellor.
after the Nazis’ defeat in the Nov. 6, 1932 Reichstag elections.
There were two persons, who might convince HindenOn Nov. 12, 1932, Schacht wrote to Hitler: “Let me congratuburg: his son Oskar and von Papen. Now we will see, how
late you for the firm attitude which you exhibited right after
Schacht and Baron von Schröder orchestrated an operation to
these elections. I have no doubt about the course of events,
do just this.
which will inevitably end in your Chancellorship. It seems
On Dec. 10, Baron von Schröder met von Papen in
that my efforts to get signatures for your Chancellorship in
Berlin. They discussed arranging a meeting between Hitler
the business milieu have not been in vain, even though heavy
and Papen at Schröder’s house in Cologne, far away from
industry is not going along, but they are called heavy industry
Berlin, just as Keppler had written to Hitler. On Jan. 4,
for a reason, they are so slow-moving.”17
1933, Hitler did meet with Papen and Schröder in Cologne.
Then, on Dec. 19, 1932, Hitler received another letter,
The meeting was staged in a truly conspiratorial manner:
this time from another “liaison” to business circles, Wilhelm
Hitler went by train from Munich to Bonn-Bad Godesberg,
Keppler, who wrote: “In these days, I have met with Dr.
where he checked into a hotel. He stayed there until dark,
Schacht and Baron Schröder; I presented them my assessment
17. Michalka and Niedhart, op. cit.
EIR
March 5, 1999
18. Michalka and Niedhart, op. cit.
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35
and then went by car to Cologne, some 50 km away.
The talks among Schröder, Hitler, and Papen lasted several hours. Later, after the war, Schröder stated that, at the
Jan. 4 meeting, he, Papen, and Hitler reached the following
agreement: Schleicher must fall, Hitler will become Chancellor, and Papen will become Vice-Chancellor under Hitler.
Papen would arrange for the non-Nazi right-wing parties to
join a coalition government under Hitler and Papen. And,
most important, Papen would work over the Hindenburgs,
senior and junior. One day after the Schröder-Hitler-Papen
meeting, Goebbels suddenly was no longer depressed. On
Jan. 5, 1933 he wrote in his diary: “If this coup succeeds, we
are not far from power. . . . Our finances have suddenly improved.”
Von Schleicher’s fatal blunder
In my view, the events of Jan. 4, 1933 are of decisive
historical importance. They represent the punctum saliens of
the tragedy. Schacht and Schröder, using von Papen, managed
to give the political initiative back to Hitler.
But even after the Jan. 4, 1933 Cologne meeting, the
course of events was not yet pre-programmed. In spite of all
the secrecy, in which the Schröder-Papen-Hitler meeting was
set up, the circles around von Schleicher knew in advance that
something nasty was being orchestrated in Cologne. Probably
the Reichswehr military intelligence tipped off the two journalists, who went to Schröder’s house and photographed Hitler and Papen entering it.
Now, Schleicher had to move decisively. The Cologne
plot—Schröder; the top banker, Papen, the most reactionary,
anti-social politician in Germany; and Hitler, the dictator-inwaiting, had to be exposed. The “public works” issue had to
be made the central issue: that Schröder, Hitler, and Papen
were conspiring to de-rail the public works program, which
was just getting off the ground. But, Schleicher did not do that.
Meanwhile, Papen had realized what danger derived from
the fact that his meeting with Schröder and Hitler was no
longer secret. He made a devious move, by asking von
Schleicher for a confidential meeting, in which he would tell
him what “really had happened at Schröder’s house.” The
Papen-Schleicher meeting took place on Jan. 9, 1933, in Berlin. Papen assured Schleicher that the meeting was not to
conspire against him, and that Hitler was still making “impossible” demands, which Hindenburg would never accept.
It seems that Papen’s trick worked, and that he succeeded
in keeping Schleicher from making an offensive countermove. In an off-the-record briefing to selected journalists, on
Jan. 13, 1933, Schleicher created the impression that he had
situation under control, and that the Cologne meeting had not
really changed the political situation.19 That was Schleicher’s
fatal mistake, because the results of the Schröder-Papen meet-
ing catapulted Hitler out of a desperate situation, right into a
successful “legal coup d’état.”
An evil little man: Oskar von Hindenburg
Meanwhile, Papen and Hitler were hyperactive behind
the scenes. The details of the Schröder-Hitler-Papen agreement were worked out in several subsequent meetings during
January, between Papen and Hitler at the Berlin residence
of Joachim von Ribbentrop, then a wealthy champagne salesman. Then, Papen and Hitler worked on Oskar von Hindenburg. They, as well as Schröder and Schacht, knew, that
Oskar, a “little man” without intellectual and moral substance, was the central figure, on whom everything depended. Only if they managed to get Oskar to exert sufficient
personal pressure on his father, was there a chance to catapult
Hitler into power. Papen saw Oskar, and old Hindenburg,
almost daily. Oskar lived at Hindenburg’s Presidential Residence, where Papen had unrestricted access. On Jan. 22,
Hitler himself met for two hours with Oskar von Hindenburg.
By that time, Oskar had already become the willing instrument of evil. He told the State Secretary in the Presidential
Office, Otto Meissner: “There’s is no way to get around
this Hitler.”20
Jointly, Papen and Oskar worked over the 87-year-old
Reich President Hindenburg. On Jan. 28, 1933, Hindenburg
relieved Schleicher of his duties as Chancellor, and on Jan.
30, named Hitler Chancellor. Why did old Hindenburg do
this? Had he not, on Aug. 13 and on Nov. 24, 1932, flatly
rejected Hitler’s demand to be named Chancellor? The following should be considered here:
1. It was no secret that Oskar von Hindenburg passionately hated von Schleicher, even before Papen and Hitler had
worked him over. At the above-mentioned press briefing by
von Schleicher, the Reich Commissioner for Public Works
Günther Gerecke, who was also there, emphasized this to the
assembled journalists.21
2. Nine months later, on Aug. 10, 1933, the Nazi-controlled Reich government donated a vast tract of state forest
in East Prussia to Oskar von Hindenburg.22
3. Oskar von Hindenburg had been in dire financial straits
for several years. Moreover, Oskar’s financial activities had
moved into the realm of corruption and criminality. At a minimum, had his ruinous financial situation become public, it
would have cost him his “honor,” in terms of the honor code
of Prussian nobility.
In his autobiography, The Long Road Home, Wall Street
banker James P. Warburg reports that in July 1931, Paul M.
Warburg had offered the German government an emergency
20. Gottfried Reinhold Treviranus, Das Ende von Weimar (Düsseldorf,
1968).
21. Henry A. Turner, op. cit.
19. Henry A. Turner, op. cit.
36
Feature
22. G.R. Treviranus, op. cit.
EIR
March 5, 1999
credit for the collapsing Danat Bank, provided that first, a
thorough audit would be made. According to Warburg, thenChancellor Heinrich Brüning was in tears, when he said that
he had to reject the offer, but could not say why. Remember
that, before becoming Reichsbank president, Schacht been an
executive of Danat Bank, and it is quite unlikely that he would
not continue to receive sensitive information from his “old”
bank. Warburg further writes, that later audits at Danat Bank
revealed that on the books of Danat Bank was a “mysterious,
non-performing loan of 10 million reichsmarks to Oskar
von Hindenburg”!
Had this become known, Reich President Hindenburg
would have had to resign immediately, as, after all, his son
was his closest aide and adviser. At the time, there was a
saying that Oskar von Hindenburg was “the son of the Reich
President, not foreseen by the authors of the Constitution.”
That is why Brüning, at a moment of the worst financial crisis
in July 1931, had refused the Warburg credit for Danat Bank.
In Oskar von Hindenburg’s massive debt, lies probably
the real secret of what was worked out among Schröder,
von Papen, and Hitler, at that fateful meeting on Jan. 4,
1933 in Cologne. And Schacht, one can safely assume, also
knew about Oskar’s debts. The available evidence indicates
that Oskar was the “Achilles’ heel,” which Schröder,
Schacht, Papen, and Hitler diabolically used to “turn” old
Hindenburg.
Once Hitler was in power though a “legal coup,” he acted
swiftly. On Feb. 27, the Nazis orchestrated the arson attack
against the Reichstag building, and this incident was then
used as the pretext for declaring a full state of emergency
in Germany, suspending all constitutional rights. This was
followed by the March 23 Ermächtigungsgesetz and the various Gleichschaltungsgesetze, which, by May 1933, led to the
liquidation of all parties—except the Nazi Party, of course—
and the trade unions. By that time, Jewish citizens were
purged from the civil service. Already, on March 17, 1933,
Schacht had been named president of the Reichsbank by Hitler. The totalitarian dictatorship was in place in early summer 1933.
On Aug. 2, 1934, Hindenburg died, and Hitler made himself Reich President, and from that point, the Army had to
swear allegiance to Hitler personally. Two months earlier, on
the morning of June 30, 1934, five SS men in plain clothes
had stormed into the house of General von Schleicher. They
were armed with pistols and instantaneously opened fire, killing Schleicher and his wife. At the same time, Maj. Gen.
Ferdinand von Bredow was shot dead.
Bredow had been for many years Schleicher’s closest collaborator in the Defense Ministry, a man with access to the
Reichswehr’s intelligence files, who knew the secrets that
Schleicher knew, especially those which concerned Hitler’s
really powerful backers, in and outside Germany, and the way
that Hitler’s “legal coup d’état” was orchestrated in January
1993.
EIR
March 5, 1999
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